PPP work has helped Minnesota’s community banks gain traction over larger
Steve Simenson, veteran owner of Goodrich Pharmacy in Anoka County, was worried in the spring of 2020.
Two of its four pharmacies were closed because they were in medical clinics closed by COVID-19. Revenue fell 25% across the company, and Simenson was faced with the prospect of laying off half of its employees.
Simenson contacted his banker for a forgivable loan from the Small Business Administration’s Paycheck Protection Program. He was a long-time client of one of the “big banks” in the Twin Cities, but that wouldn’t help. He declined to say which bank it was.
An employee referred him to Village Bank, which has most of its locations in Anoka County. There, banker Chris Schroepfer helped gather the required information from Simenson, submitted the application, and secured the first of two $ 200,000 loans funded in two weeks.
“Village Bank made this possible,” said Simenson. “We also gave them a loan from the other bank and they refinanced it at a very competitive rate. ”
Goodrich employees doubled their telehealth consultations and also had 16,000 residents of Anoka County vaccinated free of charge, from nursing homes to homeless shelters.
Village Bank turned a government business support program into a growth strategy. And it’s not the only community bank that has disproportionately used PPP to take business from the US Bank and Wells Fargo.
Village, Bremer Bank and Sunrise Banks, as well as community nonprofit financial institutions such as Meda, have worked overtime to help clients and non-clients obtain PPP funds of $ 50,000. And the SBA, last year and earlier this year, gave preference to periods of time for small borrowers, disproportionately women and minorities, to get their loans processed.
“The SBA has done a tremendous job and we have invested and implemented quickly to do our best for these Main Street customers,” said Aleesha Webb, President of Village Bank. “We have now had the time to work with them and the relationships translate into growth in assets. And income and income.”
The SBA paid bankers loan creation fees ranging from 5% for loans under $ 350,000 to 1% for loans over $ 2 million. Bankers have also charged a six-figure fee for processing loans.
Webb said Village Bank didn’t make much money on the 827 PPP loans it took because it invested in related software and paid workers for nights and weekends, as well as bonuses. .
About 50% of the PPP loans granted by Village Bank were to non-clients. And the financial benefits are starting to appear, according to banking and regulatory documents.
Village Bank, established in 1993 by President Don Kveton, Webb’s father, earned $ 3.2 million in 2019 on assets of $ 302 million in 2019. Profits were only $ 3.3 million. dollars on an asset base 33% larger than $ 403 million last year. In the first six months of this year, Village Bank has already earned $ 3.2 million on assets which have soared to $ 428 million.
Village Bank has grown from one of the top 10 to one of the top five SBA lenders in Minnesota in two years.
Meanwhile, Bremer Bank, the state’s largest PPP lender, with 7,240 loans worth $ 1.27 billion, saw its results improve in 2021.
In the first six months of 2021, Bremer delivered a strong return on equity of 14.5% and net income of $ 102.3 million, compared to $ 77.1 million in the first half of 2020.
CEO JeanneCrain cited the improvement in credit quality, which allowed the bank to release some reserves taken last year in earnings, as well as the PPP.
Sunrise Banks, Minnesota’s second-largest PPP lender according to iBanknet, declined to discuss the impact of the PPP on its bottom line.
Regulators allowed community bankers to take out more loans through PPPs than those backed by their own funds last year because it was an emergency and the government backed the loans.
Huge national banks have denied favoring big customers with PPP loans. Wells Fargo has pledged the $ 420 million it paid in fees on P3s to nonprofit Community Development Financial Institutions (CDFIs) that help low-capital minority entrepreneurs.
Federal Reserve Governor Michelle Bowman said in June that community banks and CDFIs are key to providing P3 funds to small businesses.
“Although community groups have told me that small businesses have difficulty navigating the PPP application process, especially those that do not have a pre-existing banking relationship, community banks and (CDFI) have made a concerted effort to meet the needs of small businesses, ”Bowman said. , according to the American Bar Association Journal.